Hydrox planning antitrust lawsuit against Oreo parent Mondelēz

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The cookie is crumbling in the competitive $9 billion category. 

Hydrox owner Leaf Brands plans to sue snacking heavyweight Mondelēz International this year for violating antitrust laws. The company and its CEO Ellia Kassoff claim the Oreo manufacturer is intimidating retailers and instructing workers who restock its creme-filled chocolate cookies in stores to hide, misplace or move Hydrox to less desirable locations. 

“I’m going to be pursuing a lawsuit against them,” Kassoff said in an interview. “Mondelēz doesn’t want to lose even a penny, even one little market share because it could be a sliding scale. Rarely do we lose a taste test between Oreo [and Hydrox] and I think that’s what scares them.”

Kassoff, who grew up with Hydrox and now oversees the brand from his home in California, admitted it will be “hard to stop” Mondelēz. He’s interviewing attorneys willing to take on an antitrust case, which “can be very expensive,” especially against a deep-pocked food manufacturer. 

Kassoff has expressed concern about Mondelēz’s before. Upset with the Chicago-based company’s efforts to diminish his brand’s presence in the competitive cookie aisle, he filed an official complaint with the Federal Trade Commission in 2018 seeking $800 million in damages. Kassoff said he has yet to hear back from the agency.

A spokesperson for the FTC, responsible for overseeing market competition, declined to comment when contacted by Food Dive.

To have a strong antitrust claim, Herb Hovenkamp, a professor at the University of Pennsylvania Law School, said Hydrox would have to prove a significant loss of market share and sales from these practices, a “showing that’s not easy to make.” It would be more likely to succeed in state courts where damages could be awarded for bad conduct.

Rebecca Haw Allensworth, an antitrust professor at Vanderbilt University Law School, added that it appears difficult for Hydrox to prove an antitrust case based on its arguments of retailer intimidation and the movement of products on shelves, even with convincing evidence.

“There’s so much common business practice around, put our cookies out front, put our cookies on an end cap, put our cookies on the front display. That’s all fine under the antitrust laws,” Haw Allensworth said. “It’s a little bit of a step beyond that to say ‘Throw Hydrox in the trash.’ It’s hard to tell a really solid anti-trust story here.” 

A behemoth in the cookie space

Oreo, with more than $4 billion in annual sales, has evolved into a juggernaut in the retail cookie category.

In addition to its signature cookie, Mondelēz has rolled out dozens of permanent and limited-time flavors, including Birthday Cake, Churro, Watermelon, Cotton Candy, Lemon and Toffee Crunch. It even has a presence in cakes, cereal and ice cream, among other sweets, through its own innovation and partnerships with other CPG manufacturers.

In an email to Food Dive responding to Hydrox’s allegations, Mondelēz defended its business. “Our shelf placement in stores stems from the fact that Oreo is the #1 cookie in the US, loved by consumers, and retailers typically align their placement decisions to serve that consumer demand,” a spokesperson said. “We always operate with integrity, and we are proud to be America’s favorite cookie.”

Hydrox cookies.

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Permission granted by Hydrox

 

Since it filed its case with the FTC, Kassoff said Mondelēz has grown even more ruthless.

His upcoming lawsuit will claim that Mondelēz is intimidating retailers such as Publix and Wegmans by vowing to pull Oreo from their shelves or stop supplying them with certain flavors if they carry Hydrox. He said customers, product brokers and even Kassoff himself have noticed Hydrox still getting hidden on shelves where it is available — a practice designed to lower sales with the eventual goal of getting the product discontinued.

Hovenkamp said if Mondelēz did threaten to pull Oreo, it was likely part of a negotiating tactic, especially if consumers were interested in purchasing both brands. He also doubted whether retailers would allow food manufacturers to engage in practices that hurt the store and its customers.

Source: fooddive.com

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